Embattled Robinhood CEO Vlad Tenev denied Friday that pressure from Wall Street hedge funds prompted the mobile brokerage firm’s decision to restrict trades involving GameStop shares as prices surged this week.
Robinhood has faced unprecedented scrutiny in recent days from critics, including Congressional lawmakers and Barstool Sports founder Dave Portnoy, who alleged the platform halted trading of stocks favored by retail investors to protect hedge fund allies. In an interview with Yahoo Finance, Tenez referred to the allegations as a “conspiracy theory.”
“I think I've over and over again said that it's not true,” Tenev said. “Our decision to temporarily restrict customers from buying certain securities had nothing to do with a market maker or a market participant or anyone like that putting pressure on us or asking us to do that. It was entirely about market dynamics and clearinghouse deposit requirements, as per regulation.”
Robinhood drew widespread criticism this week after it temporarily applied purchase limits to several stocks touted on Reddit’s “WallStreetBets” forum, including GameStop, AMC Entertainment and Nokia. The day trading app began accepting buys again on Friday, but enacted a limit of just one share per user as of the close of trading.
GameStop was one of the most-shorted stocks on Wall Street before the sudden interest caused the stock price to surge. The trading frenzy triggered a “short squeeze,” costing hedge funds that bet against the stock billions of dollars.
Lawmakers on both sides of the political aisle, including Rep. Alexandria Ocasio-Cortez, D-NY, and Sen. Ted Cruz, R-Tx., have called for an investigation into Robinhood’s decision. In a blog post, the platform said the restrictions were meant to mitigate risk.
“I think if you look at this entire situation, it's a novel situation,” Tenev added in the interview. “A relatively small number of stocks have gone viral on the internet. And as things that go viral on social media and the internet do, there's an exponential growth in interest. And so we have to be prudent. And we have to have a prudent risk management. And that's what the firm did.”